Banking reporter

Savings interest rates are trending down despite no change in RBA's official rate.

Interest rates on online saver accounts are drifting down despite no official moves from the Reserve Bank, in a sign banks are competing less fiercely for deposits.

National Australia Bank's online lender UBank last week cut interest rates for its USaver account by 0.25 percentage points to 4.01 per cent, and comparison website RateCity says deposit rates have dropped for 15 online saver accounts across the industry this year.

Other banks that have cut deposit rates this month include Dutch online bank RaboDirect and Arab Bank Australia, with each trimming rates on types of online accounts by 0.1 percentage points, RateCity said.

Reserve Bank figures also show average ''bonus'' interest rates have fallen from 4 per cent to 3.9 per cent this year, while average term deposit rates are also slightly lower.

The trend comes despite no change in the cash rate since last August, and bankers concede they are competing less fiercely for deposits than a few months ago.

RaboDirect group executive Greg McAweeney said competition to attract household deposits had eased slightly after a scramble to lock in this stable form of funding after the global financial crisis.

''There is still plenty of competition across call and term deposit rates, although it does appear rate competition has eased a little from the intense levels seen in previous years,'' Mr McAweeney said.

''The easing of rates may reflect the self-funding levels banks have achieved over the past few years, after having competed aggressively to improve the proportion of retail deposits as a percentage of their total funding.''

RateCity chief executive Alex Parsons said that among its panel of banks, 15 had cut deposits rates for online accounts since the beginning of the year and only one had raised deposit rates.

''The majority are either not moving or decreasing their rates, which suggests a lessening of competition generally,'' he said.

The level of interest paid on deposits has a significant impact on bank funding expenses, so falling competition could benefit the sector.

However, banks maintain that competition to lure household savings remains robust, as new regulations require lending to obtain a large share of their funding from this more stable source.

A UBank spokeswoman also said competition remained ''strong'' and the bank had considered a range of factors before cutting the rate.

''We are still seeing aggressive pricing across the industry,'' she said.

Banks have previously blamed stiff competition for deposits - which pushes up bank funding costs - for their failure to pass on the full value of official interest rate cuts to home loan customers.

With wholesale funding markets also improving this year, the dwindling in deposit competition suggests banks have experienced an overall drop in their cost of funding.

However, analysts say this windfall is being passed on to new customers through deep discounts on home loan interest rates, rather than existing borrowers.

A note from CLSA analyst Brian Johnson last month said there was ''no doubt'' retail deposit competition had eased, but this saving was being passed on to new-borrower customers, potentially eroding bank margins.